Life cover for life

When someone mentions whole of life plans, most people will think of a niche product that serves as an inheritance tax planning tool for high-net-worth clients. And it’s really not surprising they’ve been pigeonholed in that way because before the arrival of RDR in 2013, that’s more or less exactly what they were.

For advisers thinking about recommending a whole of life plan today, it’s worth bearing in mind that the product now fulfils a range of roles as well as IHT planning. From wanting to leave a lump sum for loved ones, to helping cover their own funeral costs and making sure a business is protected against their death, there are many reasons why clients might choose a whole of life plan. And given the way protection needs are changing, with people buying their first home and having children later, not to mention our ageing population, there’s even more reason to recommend the product as an alternative to term assurance.

It might be more expensive than term, but as a whole of life plan stays with the planholder throughout their life, many clients may be happy to pay the extra. They won’t need to worry about selecting the right length of term and its flexibility means that it doesn’t have to be used for just one purpose. For example, someone might have taken it out initially for the sole purpose of protecting their mortgage if they die. If the mortgage has been paid off, however, it could then be used to take care of the children’s inheritances. If by that stage the client has become short of money they could even get the children to take over the payment of the premiums, as third-party payments are allowed.

Those planning to leave the family home to loved ones have the added risk these days that they may be forced to sell their home to pay for nursing care later in life. Taking out a whole of life plan earlier in life could replace some of the lost inheritance that care fees could take away. The money could be used to ensure the children have an inheritance and/or to make sure the family home is protected after their parents have passed away.

For business protection purposes, whole of life plans can be used for loan protection, shareholder protection or keyperson cover. They have built in flexibility to allow cover levels to be adjusted in response to business events via insurability options. So a business owner could take one out initially to protect their business, flexi it as the business grows and, once they’ve retired, switch it to an alternative usage.

There will always be a place for term as this usually complements the term of a mortgage or runs alongside various other financial commitments with set end dates, but with people living longer and the implications this brings, the need for a whole of life product has never been greater. So, whether they’re raising a young family, concerned about paying IHT liabilities or want to protect their business against the financial consequences of dying, it could be worth recommending a whole of life plan to your clients.